We examine the impact of differences in time varying social views towards sin stocks across G20 nations on firm valuation and excess returns. Sin stocks have an 8% lower equity valuation in countries where society is strongly against such industries. After controlling for other factors, sin stocks have excess returns of about 1–2% annually. However, these returns are largely arbitraged away in nations without capital and investment controls, but persist in countries with capital restrictions. These results are robust to proxies for litigation risk, transparency, growth opportunities, sin measures, and alternative measures of firm valuation.

A long-recognized phenomenon in capital markets is the underinvestment in foreign equity securities, known as equity home bias. Our study examines the effect of board independence on the firm's ability to attract foreign equity capital. After accounting for potential endogeneity, we document that U.S. and non-U.S. foreign investors exhibit a strong preference for firms with more independent corporate boards. Further, our analysis indicates that the positive relation between board independence and foreign ownership is significantly stronger in countries with less developed legal institutions and poor external protection of investor rights. We suggest that it is in these countries that firm-determined characteristics such as independent boards can be most beneficial in attracting capital. We also find that institutional investors are more responsive to the impact of independent corporate boards than are other types of investors.

In the presence of high uncertainty and limited experience, can observing the actions of other acquiring predecessors help firms make better acquisition decisions? Using a sample of cross-border M&As conducted by US acquirers in developing countries, we document a positive and significant relationship between an acquirer's performance and its predecessors' acquisition activity. This relationship is especially pronounced in the prevalence of news events about the outcome of predecessors' acquisitions, when predecessors consist of US peers from the same industry and/or when targets are based in culturally distant countries. Our findings shed light on one channel through which information spillovers across industries and acquiring firms could be a key driver of value creation in developing market cross-border M&As.

We examine whether disagreement between managers and investors, in the context of mergers and acquisitions, affects the information contained in bidder returns. We test the disagreement hypothesis, which posits that disagreement causes investors to be less certain about their revaluation of acquiring firms, making bidder returns less informative. Consistent with this hypothesis, we find an inverse relation between bidder returns, which proxy for the degree of disagreement, and the change in the bidders' implied volatility. Also consistent with the hypothesis, we find that the significant inverse relation between bidder returns and the change in implied volatility holds only for cases of negative bidder returns. We test for alternative explanations of this relation, but continue to find robust support for the disagreement hypothesis. Finally, the relation between bidder returns and the likelihood of deal completion is stronger when announcement returns are more informative, suggesting managers “listen to the market” more when the market response is more informative.